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INDIAN SUMMER LOOKING SUSPICIOUSLY LIKE AN ENGLISH ONE…

INDIAN SUMMER LOOKING SUSPICIOUSLY LIKE AN ENGLISH ONE…

Sterling appears to have struggled to adjust to getting out of bed in the dark these days after suffering a poor start to the weekend. Friday’s U.S. Non-Farm Payrolls report for September disappointed the market; a lukewarm job gain of 142,000 positions, far below the 201,000 forecast. The US unemployment rate remained unchanged at 5.1% and the participation rate plunged to 62.4%, the worst since October 1977, and wages remained flat. The negative report cools expectations for a near-term rate hike and weighs heavily on already continual concerns over the global economy.

As soon as the Payrolls report was released Sterling gained 0.5% against the Dollar and slumped 1% versus the Euro as bets on UK Interest Rate hikes slumped to 50/50 by March 2016. The UK September services PMI figure due today could trigger a minor rally towards 1.5330 levels. Further gains seem difficult if risk aversion returns in the next few days, leading to a further drop in the Fed and Bank of England rate hike bets. If the services PMI disappoints, Sterling could drop to 1.5000 against US Dollars.

The current sentiment is that the further the Fed is from raising Interest Rates the nearer the European Central Bank comes to more QE. This means that a weak US data/drop in the Fed rate hike bets could push the EUR higher, but at a slower pace than other major currencies like CHF and JPY. However, against risk currencies like GBP and commodity dollars (AUD and CAD), the EUR could spike especially if the risk aversion becomes more intense in the days ahead.

US ISM Non-Manufacturing PMI, Trade Balance, Mario Draghi’s speech, the rate decision in Japan, Australia and the UK and the important Federal Open Market Committee Meeting Minutes are the main events on Forex calendar.

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